As the government plans to expand its borrowing over the medium term, it is important that the funds be channelled to top-priority and high-return projects that will ensure the sustainability of the debt burden.
The new administration intends to borrow Sh3.6 trillion over the course of its first five years in power.
The Sh3.6 trillion is equivalent to 89 percent of the record Sh4.1 trillion that the previous government borrowed in the five years to June 2022.
The budget is now projected to top Sh5.1 trillion in the fiscal year ending June 2027, expanding from Sh3.0 trillion in the year ended June 2022.
While the new five-year borrowing marks a slight slowdown in the pace of debt accumulation, it reminds us all that governments will almost always spend more rather than cut their budgets.
The new administration had ambitious plans to cut borrowing substantially by eliminating some spending items and ramping up tax collection.
The reality is, however, different and it is therefore vital that as borrowing and spending rise, efforts must be made to cut waste and prioritise areas that aid the country to achieve its social and economic goals.
It will be prudent to allocate more funds to much-needed development projects such as irrigation and infrastructure –including reliable and cheaper electricity and water connections— to support manufacturing and improve living standards.
Government borrowing is premised on the idea that increased economic growth will help to service the debt by generating higher tax revenues from diverse activities including trade, employment and consumption.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
